Sam Bankman-Fried released a manifesto today mirroring his Substack account where he claims his innocence in FTX’s bankruptcy.
Hat tip Bob Bishop
SBF summarized his points –
In mid November, FTX International became effectively insolvent. The FTX saga, at the end of the day, is somewhere between that of Voyager and Celsius.
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Three things combined together to cause the implosion:
a) Over the course of 2021, Alameda’s balance sheet grew to roughly $100b of Net Asset Value, $8b of net borrowing (leverage), and $7b of liquidity on hand.
b) Alameda failed to sufficiently hedge its market exposure. Over the course of 2022, a series of large broad market crashes came–in stocks and in crypto–leading to a ~80% decrease in the market value of its assets.
c) In November 2022, an extreme, quick, targeted crash precipitated by the CEO of Binance made Alameda insolvent.
And then Alameda’s contagion spread to FTX and other places, similarly to how Three Arrows etc. ultimately impacted Voyager, Genesis, Celsius, BlockFi, Gemini, and others.
Despite this, very substantial recovery remains potentially available. FTX US remains fully solvent and should be able to return all customers’ funds. FTX International has many billions of dollars of assets, and I am dedicating nearly all of my personal assets to customers.
SBF Claims FTX US is in good shape in an apparent attack on the DOJ.
- This post is about FTX International’s (in)solvency.It’s not about FTX US, because FTX US is fully solvent and always has been
When I passed FTX US off to Mr. Ray and the Chapter 11 team, it had around +$350m net cash on hand beyond customer balances. Its funds and customers were segregated from FTX International.
It’s ridiculous that FTX US users haven’t been made whole and gotten their funds back yet.
Here is my record of FTX US’s balance sheet as of when I handed it off:
FTX International was a non-US exchange. It was run outside the US, regulated outside the US, incorporated outside the US, and took non-US customers.
(In fact, it was primarily headquartered, run from, and incorporated in The Bahamas, as FTX Digital Markets LTD.)
US customers were onboarded to the (still solvent) FTX US exchange.
SBF says that he did nothing wrong and he kindly would offer up some of his funds if he could use his Robinhood money for legal expenses.
I didn’t steal funds, and I certainly didn’t stash billions away. Nearly all of my assets were and still are utilizable to backstop FTX customers. I have, for instance, offered to contribute nearly all of my personal shares in Robinhood to customers–or 100%, if the Chapter 11 team would honor my D&O legal expense indemnification.
TGP wrote about this Robinhood request previously.
AUDACIOUS: SBF Demands Bankruptcy Court to Hand Over $450 million in Robinhood Stock to Help Him Pay His Legal Bills.
SBF goes on to say the problem was the market lost 80% of its value and he still doesn’t have access to the passwords to FTX systems.
Next, SBF gets into the details and says that he received an audit report that confirmed his analysis of the firm’s financial standing. However, he doesn’t note that this was not full audit by a Big 4 accounting firm, it was something much less than that.
Then SBF says that:
There were billions of dollars of funding offers when Mr. Ray took over, and more than $4b that came in after.
But this sounds like a Ponzi scheme. Is he saying that more funding could have been used to offset the billions lost with no attached liabilities?
SBF goes on to say that he wanted to share this all in front of the Democrat House but he was unfortunately arrested the night before.
I had been planning to give my first substantive account of what happened in testimony to the US House Financial Services Committee on December 13th. Unfortunately, the DOJ moved to arrest me the night before, preempting my testimony with an entirely different news cycle. For what it’s worth, a draft of the testimony I planned to give leaked out here.
It’s very puzzling why SBF’s lawyers would allow him to release this message. This whole FTX case smells really bad. What is the truth?